PETROL PRICES EXPECTED TO DROP AS STRAIT OF HORMUZ REOPENS

By: Muftau Fatimo

The reopening of the Strait of Hormuz after a ceasefire agreement in the Middle East is expected to stabilise global oil markets and potentially reduce petrol prices. However, experts have cautioned that Nigerians may not experience an immediate drop in pump prices.

They explained that while falling global oil prices could eventually influence Nigeria’s downstream sector, petrol prices may only gradually ease to about N1,000 per litre if market dynamics are fully allowed to play out.

Two energy experts and oil marketers shared these views in separate interviews with correspondents on Friday in Abuja.

An energy law expert at the University of Lagos, Dayo Ayoade, noted that the ceasefire involving the United States, Iran, and Israel has helped restore confidence in global shipping routes, but said its effects on domestic fuel pricing would take some time to materialise.

He described the truce as a temporary stabilising factor for the oil market, saying it would help reduce supply chain disruptions that had recently pushed crude prices higher.

“In the short term, we would have relative peace because it is a ceasefire, and hopefully it will hold. Essentially, it is a confidence-building arrangement between the parties involved. What we can expect is a positive reaction from the oil markets, leading to a gradual normalisation of prices since tankers still need to pass through the strait to reach their destinations,” Ayoade said.

He further noted that the reopening of the key transit route would strengthen investor confidence and improve the movement of goods across global markets.

“There will be an immediate boost in confidence as this shipping bottleneck comes to an end. This also means disruptions affecting fertilisers, jet fuel, and even food supplies will begin to ease,” the expert said.

Ayoade noted that the development would favour oil-importing countries in Africa and Asia that have been struggling with high energy costs.

However, he added that the decline in oil prices could also reduce recent revenue gains recorded by oil-producing nations such as Nigeria.

“On the other hand, the oil price gains enjoyed by oil-producing countries like Nigeria may decline. So, it is a mixed outcome,” Ayoade said.

On domestic fuel pricing, he explained that Nigerians should expect a gradual reduction rather than an immediate relief at the pumps.

“There will be a price drop, but it will take time to reflect locally. It won’t happen immediately, but within two to three weeks, if the ceasefire holds, we should see gradual normalisation,” he added.

Also speaking, the Chief Executive Officer of Petroleumprice.ng, Olatide Jeremiah, cautioned that although global oil prices have begun to fall, local marketers may delay passing the benefits on to consumers.

He said, “Depot and retail prices are expected to drop, but there are concerns that players may not reflect global price changes promptly in the local market. Nigerians have borne the burden of rising prices; reductions should also be reflected accordingly.”

Jeremiah disclosed that crude prices had already recorded a sharp drop following the reopening of the Strait.

“Oil prices dropped by about 11 per cent today alone. As movement resumes through the Strait of Hormuz, petrol prices could fall below N1,000 per litre within days,” he added.

Similarly, the Petroleum Products Retail Outlets Owners Association of Nigeria projected that petrol prices could drop from the current N1,261 per litre to below N1,000.

The association’s Publicity Secretary, Joseph Obele, said crude prices had begun to decline following the easing of tensions.

He recalled that petrol sold for about N800 before the crisis escalated in February, expressing optimism that prices could return to that range if the situation stabilises.

“With the reopening of the Strait of Hormuz, Nigerians should expect a significant reduction in petrol prices. It could drop below N1,000, possibly around N900 per litre, if current conditions are sustained,” Obele said.

He also urged the Nigerian National Petroleum Company Limited to expedite the reopening of refineries, including the Port Harcourt refinery, to further reduce fuel costs.

Responding to concerns about delayed price adjustments, Obele urged marketers to align pump prices with their costs.

“Marketers should sell based on their cost prices. Those with old stock should adjust fairly and reflect reductions when they receive new supplies,” he said.

Founder of the Centre for the Promotion of Private Enterprise, Muda Yusuf, on his part, said the easing of crude oil prices could translate into lower pump prices, although existing stock bought at higher rates may delay immediate relief.

“We should see the impact within the next few weeks. Even though marketers and oil companies would say that the stock they have has to be exhausted because they bought it at a high price. Oil price is already dropping just today. So if there is no violation of the ceasefire, we should be expecting major relief in terms of pump price,” he said.

However, an economic expert, Sheriffdeen Tella, cautioned that the drop in oil prices may not immediately lead to a reduction in fuel costs.

“The opening might ease, but what about those increasing output? One thing is for output to increase, and another is for the route to be clear. It may not translate into prices coming down soon. Countries like Nigeria may still be making some gains,” he noted.

Global oil markets had surged earlier in the week after tensions in the Middle East disrupted shipping through the Strait of Hormuz, a key route for about a fifth of global oil supply.

However, Iran’s Foreign Minister, Abbas Araghchi, announced on Friday that the waterway would remain open to commercial shipping as long as the ceasefire holds.

“The passage for all commercial vessels through the Strait of Hormuz is declared completely open for the remaining period of the ceasefire,” he said.

The announcement followed ceasefire arrangements involving Iran, the United States and Israel after rising hostilities that unsettled global energy markets.

Reacting, US President Donald Trump welcomed the development but said restrictions on Iran would remain pending a broader agreement.

Meanwhile, President of the Dangote Group, Aliko Dangote, had earlier warned that prolonged oil price volatility could impact key sectors, including aviation and agriculture.

He noted that rising fuel costs were already affecting airline operations and fertiliser prices.

“Two months ago, fertiliser was about $400. Today, it is $850. Governments may need to provide subsidies this farming season,” Dangote said.

Energy analysts said the crisis highlighted the vulnerability of global oil supply routes, with expectations that Middle Eastern producers may invest in alternative pipelines to reduce reliance on the Strait of Hormuz.

Ayoade noted that the development could also accelerate the global shift to renewable energy.

“Developed countries may intensify efforts to reduce dependence on Middle East oil. Nigeria must be strategic in navigating this transition,” he said.

The Strait of Hormuz remains one of the world’s most strategic oil transit routes, linking the Persian Gulf to global markets.

Disruptions along the corridor typically trigger sharp increases in crude oil prices, with widespread effects on fuel, food and transportation costs.

The latest crisis, driven by tensions involving Iran, the United States and Israel, had pushed oil prices upward before the ceasefire restored relative calm to the market.